Every now and then it’s useful to read something you have no clue what the author is talking about. I don’t mean you don’t understand the terminology or math. I mean you look at what they are saying, you register their meaning, and say, ‘huh?’ This is the reaction I got to Gordon Boyce’s ‘Valuing Customers And Loyalty’ published in Critical Perspectives On Accounting. I think Boyce is arguing that he has found a new right for people with a surfeit of privilege to worry about: the right to donate. (Or more accurately the right to be asked to donate even if they don’t want to give).
In essence, he seems to argue that not-for-profits have an ethical obligation to target everyone equally. To give everyone, regardless of whether they have any money or interest in the cause, the right to donate to the not-for-profit. I just don’t see how this is meant to work in practice, nor why it is a good idea in theory.
What Is Boyce Against?
To be fair, it is important to note that Boyce starts somewhere that a number of people might agree with him. Basically, his concern is that the idea of customer focus (customer centricity) implies that some customers are seen as more important than others. I must confess I thought Boyce did a good job of explaining many of the ideas in the field. (He is clearer on the ideas than many marketers were, indeed sometimes are still, despite Boyce writing in 2000).
He has some concerns about the use of segments and the assumptions behind CLV. Many of these I think the marketer should just plead guilty too. Customer lifetime value involves assumptions about the future which are likely to often be wrong. That is the nature of predictions. Similarly, while an individual value for CLV for each customer would be lovely it presents significant practical difficulties. Grouping is sometimes inevitable. We group people all the time. Sometimes this is helpful, sometimes not, often it is both helpful and problematic. To my mind, the question should be, ‘do the benefits to grouping outweigh the costs?’ People can, and probably should, disagree about this. Still, I don’t see grouping as a fatal flaw. I’m not sure Boyce would see it as the biggest problem either.
Customer Centricity And The Excluded
One serious challenge is that a customer centricity approach can exclude some customers. If you are an extreme ‘firms should only care about the shareholders’ type person you can shake this off easily. Just answer ‘What is that to do with the firm?” I am not that sort of person. (Click here for some thoughts). As such, I think Boyce has a point that should be taken seriously. This critique deserves consideration in some instances.
Conveniently left out of the story … is the perspective of the customers whose numbers do not add up and who are excluded — customer liabilities who are either denied access to goods and service altogether or denied access to levels of quality and service that customer-assets receive.Boyce, 2000, page 673
Boyce is not wrong. If you prioritize some customers they get more than those who aren’t prioritized. I think it is reasonable to argue that a firm might have a duty to serve certain customers at certain times. For example, public utilities.
That said, surely every firm can’t serve everyone all the time? It is hard to know where to draw the line. Is the duty to serve all equally true for all for-profit companies? Does Tesla have a duty to offer its products to everyone regardless of their wealth? Should it target its marketing at poor communities ‘to be fair’? (I worry that would seem a little callous: ‘look at this cool thing that you can’t afford’). What benefit would everyone being treated exactly the same all the time gain us?
The Role Of Government
I see Boyce’s objection as largely being against a system that allows some people more stuff because they have more money. It is perfectly reasonable to argue for a radical system change. Yet, I’m not sure for-profit companies are likely to lead this charge however persuasive an academic piece is. The argument seems much bigger than any firm’s use of CLV.
I personally see the logic of customer centricity as reasonable for many firms precisely because I accept the logic of government intervention in other sectors and at other times. If there is a compelling public interest for firms not to be customer centric then government must structure the market differently. Regulation must mandate all customers are served rather than just hope firms do a bad job in targeting.
There are some customers, most obviously those with little money, who will not be properly served by for-profit businesses. Where the goods/services are essential, e.g., healthcare, I think there is a need for government to play a role. For example, the UK’s National Health Service is provided to all rather than leaving the service to private entities. Alternatively, customer coverage can be driven through regulation of market entities. A for-profit utility might be licensed to operate only if it serves all those who need it in a certain geographic area.
How Did We Get To The Right To Donate?
Where Boyce completely lost me was with a minor (snarky) footnote. This suggested to me a certain cluelessness about the world. Boyce’s footnote is the sort of thing that (rightly) gets academics a bad name.
In an almost perverse use of customer valuation, [Bruce] Campbell (1994) shows how not-for-profit fund-raising organisations can use CLV to maximise [not sic, UK spelling] ‘lifetime donor value’. He asserts that fund raises [sic] are analogous to direct marketers, and they have interests in “acquiring donors” from “the best sources”. Such donor acquisition is portrayed as an investment that can benefit from the application of CLV techniques. This transformation of donors into nothing but dollar values, and the excessive focus on the financial aspects of what the organization is about apparently raises no moral or ethical issues for the author, and does not raise questions as to what the organisation is all about.Boyce, 2000, page 685
Where to start? Boyce is calling Bruce Campbell unethical for trying to raise money for a not-for-profit. Assuming the cause is a good one, and hopefully the fundraiser at least thinks so, I think it raises ethical and moral issues if you aren’t trying to raise money when you are, er, a fundraiser. Imagine the organization is trying to feed the starving. Boyce apparently thinks that you should waste money on trying to get money from donors who won’t give. This is presumably because to Boyce everyone has some sort of right to donate? (Even if they don’t want to). Let me say I know who I want on my ethical team. Hint it is Campbell as he seems to be trying to make the world a better place. Unlike Boyce who has disappeared where the sun don’t shine.
The Right To Donate
I don’t think Boyce needs to worry that people will have no opportunity to give. There are plenty of worthy causes to give to if any specific fundraiser doesn’t approach you and ask for your money.
Maybe I missed the point but I simply don’t know what Boyce is on about to be honest.
For more on CLV see here.
Read: Gordon Boyce, “Valuing customers and loyalty: the rhetoric of customer focus versus the reality of alienation and exclusion of (de valued) customers.” Critical perspectives on accounting 11, no. 6 (2000): 649-689